Wanted: bold BoJ governor, says Abe

Japanese Prime Minister
Shinzo Abe is
seeking a “bold policy leader" for the next Bank of Japan governor as he aims to end deflation and drive a recovery from recession.

The choice of a successor to Masaaki Shirakawa, whose term ends in April, would be made after consultations with Yale professor Koichi Hamada and others, Mr Abe said.

The government and central bank needed to agree on implementing a 2 per cent inflation target to end deflation, he said. Mr Abe last week announced a ¥10.3 trillion ($116 billion) spending package, which includes money to stimulate private investment to boost the economy.

“We want someone who can push through bold monetary policy," Mr Abe said. “We are thinking hard about fiscal discipline as we form the next fiscal year’s budget. Still, the economy isn’t going to change unless we display a firm commitment to escape deflation at the same time."

Consumer prices excluding fresh food haven’t advanced 2 per cent for any year since 1997, when a national sales tax was increased. They fell 0.1 per cent in November, compared with a year earlier.

Japan’s gross domestic product shrank at an annualised 3.5 per cent pace in the third quarter after contracting in the three months ended June, meeting the textbook definition of a recession.

Mr Abe’s extra spending would help deliver real annualised GDP growth of 3.5 per cent in the second quarter this year, Nomura Holdings said. The brokerage raised its GDP forecast for the fiscal year starting in April to 1.8 per cent from 1 per cent, citing the impact of the stimulus program and improved prospects for exports with a weaker yen and a recovery in the US.

The spending would include about ¥3.1 trillion for revitalising local economies, medical services, childcare and other measures, the government said. Measures to stimulate private investment will include steps to promote clean energy and energy saving.

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Mr Abe said he would also like to increase defence and coast guard spending in next fiscal year’s budget. A territorial dispute between Japan and China is raising tensions. China dispatched two J-10 fighters to the East China Sea last week to monitor two Japanese F-15s that were trailing a Chinese patrol aircraft, the Ministry of Defence said.

The incident comes as China asserts sovereignty over uninhabited islands administered by Japan, known as Senkaku in Japanese and Diaoyu in Chinese.